Crisis spurs competition in Spain’s fund management industry

By: Patrick Blum | 05 Dec 2011

The past year’s financial turmoil has intensified competition across Spain’s asset management industry as companies fight for a share of a diminishing wealth market, with both local and international asset managers under pressure.

For the first time this year, in the third quarter foreign managers saw assets decline after a period of steady growth. The domestic industry continued to experience declines. By August, Spanish firms were managing mutual funds totalling €129.24bn, down from €138.08bn in December 2010 and from €163.24bn at the end of 2009, according to figures from Inverco, the Spanish asset management association.

By comparison, international companies were managing about €50bn of assets, up around 20% from €41.5bn in December 2010. However, international managers could not escape the crisis. Rising Spanish risk aversion in the face of high volatility in the financial markets has hit foreign companies which tend to focus on offering high value-added products closely tied to equities. By the end of September assets under management by foreign companies had fallen by 6% to €47bn, and the decline has continued.

“At the beginning of the year clients increased the risk in their portfolios, but in August they started to de-risk and that movement has continued in September and well into October. Risk aversion is currently at a high and clients continue to de-risk their portfolios,” says Carla Bergareche, general director Spain and Portugal at Schroders Investment Management in Madrid.

Until the summer, international companies benefited from investors looking for wider investment options in spite of a declining local market. Investors have been withdrawing money from the fund industry in Spain since 2007, but international players had fared better. “In 2010, we saw a decoupling in terms of the foreign players versus the local industry. Foreign players were selling more and we were gaining market share,” says Bergareche.

Summer reversal

Investment flows have now turned negative for foreign players and the local industry continues to be under pressure in spite of a flight to traditional ‘safe’ assets. Since the summer, there have been big inflows into money market funds and outflows in all the value added and equity products.

Until then there had been inflows in global funds and value added products, but this practically came to a halt and investors are still reluctant to take up risky assets, says Paloma Piqueras (pictured), managing director asset management Europe at BBVA.

August saw inflows of €6.3bn in fixed income guaranteed funds, while in general in the industry there were outflows of €4.7bn. The large inflows in guaranteed funds reflected the renewed popularity of these products.